The system of private property is the most important guarantee of freedom, not only for those who own property, but scarcely less for those who do not. -- Friedrich A. Hayek


PREMIUM LEGAL RESOURCES LEGAL FORMS ASK A LAWYER

The Billing Abuses of Lawyers

from The Moral Compass of the American Lawyer
by Richard Zitrin & Carol M. Langford
Ballantine Books, 1999

It's sometimes easy to pick out the most extreme examples of bad behavior and claim they are "proof" of widespread abuse. But there are so many anecdotal accounts of incredible billing abuses by lawyers that it's hard to choose among them. Perhaps the most well-known recent case is that of Webster Hubbell, a former chair of the Arkansas Bar's ethics committee and a partner at Little Rock's prestigious Rose Law Firm, who went from number three in the Clinton Justice Department to prison. Hubbell was convicted of stealing $394,000 from his clients and his own law firm by billing for time he never worked, and claiming that personal expenses -- including purchases at Victoria's Secret and a fur salon -- were business-related.

Hubbell is hardly alone. Another flagrant example of gross billing abuse involved a prominent Chicago lawyer in a large and prestigious firm who averaged 5,941 billable hours per year over four years. That's an average of sixteen hours and twenty minutes per day, every day, 365 days a year. The lawyer claimed to have never taken a day off in four years. But every lawyer must remain current on the law, go to firm meetings, and stay in touch with clients to keep and develop business It's impossible to convert every second into time that can be billed to a client. Carl T. Bogus, a longtime Philadelphia practitioner who recently turned to teaching law, calculated that if this lawyer met "the standard assumption" that at most, only 70% of work time can be turned into time billed to a client, "this lawyer needed to work 23.3 hours per day, 365 days a year, leaving just enough time for a round-trip commute home but not enough time to enter the house." Yet, the lawyer's partners remained silent until an anonymous source furnished reporters with the lawyer's billing sheets.

Billing abuses are by no means limited to excesses at our largest firms. A small firm Kansas attorney reportedly charged the State Workers' Compensation Fund an average of 33 hours a day for one ten-day period. An auditing expert uncovered a Southern California lawyer who had billed a single client for 50-hour workdays and a New Orleans firm that routinely billed four hours for letters a single sentence long.

Despite these extreme cases, lawyers -- with the notable exception of the high-visibility Hubbell, whose prosecution stemmed from the Whitewater investigation -- are rarely punished for billing abuses. Raleigh bankruptcy attorney Mark Kirby was indicted in federal court on 16 counts of billing fraud. Among other offenses, he billed 90 hours in one day. Between June 1990 and July 1991, Kirby billed a total of 13,000 hours, even though that 13-month period, calculated at 24 hours a day seven days a week, was only 9,500 hours long. Yet Kirby's trial resulted in a hung jury. His defense: everybody does it.

Kirby eventually pled guilty to one count and was sentenced to 15 months. Hubbell received 21 months in prison, though one former Arkansas Supreme Court judge argued it was unfair to single out Hubbell when billing fraud is so common and so rarely prosecuted. Indeed, the justification that "everybody does it" is widely used in the legal community. "The problem is not so much the behavior of one lawyer" says Professor Bogus, "as it is the conduct of the firm." If attorneys believe that they can ethically "multi-task," by billing two, three or more clients for the same hour, or bill for the "value" of their services, even when that value vastly exceeds the time the work actually takes, lawyers like Kirby will continue to be the inevitable consequence.

In 1991, Cumberland (Ala.) law professor William Ross surveyed 280 lawyers in private practice and 80 who worked in-house for companies. The results were shocking. Seven out of eight practicing lawyers said that it was ethical to bill a client for "recycled" work originally done for another client. Half said they had billed two different clients for work performed during the same time period, such as dictating a memo for one client while traveling for another. Just as shocking were what lawyers concluded about their colleagues' billing practices: 55% said that lawyers occasionally or frequently "pad" their hours; 64% said they were personally aware of lawyers who had padded their bills. The in-house lawyers surveyed were even more clear: over 80% felt that the billable hour influenced how much time the outside lawyers they hired spent on a case, and 74% felt that the billable hour significantly decreased lawyers' incentives to work efficiently.

"You can handle a case aggressively and efficiently at the same time," says San Francisco lawyer and billing expert William Gwire, who often consults with clients suspicious of their lawyers' bills. "I think the issue can be summed up in one simple sentence: is the firm acting in the best interest of the client -- putting the client's interests ahead of its own?" When they do, lawyers bill honestly and fairly. When they don't, they overbill and often get away with it. As Professor Ross says, "overbilling is the perfect crime because it's awfully hard to detect."

Detection is made more difficult because so many lawyers turn a blind eye toward their colleagues' dishonesty. Catholic University law professor Lisa Lerman talked to many lawyers uncomfortable with partners who cheated, "but they go along with it because they see it as professional suicide to do anything about it." And the bigger the firm, the deeper the abuses can be buried.

      Excerpted from pages 82-84 of The Moral Compass of the American Lawyer: Truth, Justice, Power, and Greed, © 1999, Richard Zitrin [email protected] & Carol M. Langford [email protected] All rights reserved.
      The critically acclaimed book by two noted legal ethics professors who write frequently about ethics and morality in the legal profession is about how the legal system allows lawyers to define "ethics" as what they can get away with rather than how they should behave.

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